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Eicher Motors
Q1 surprise purely operational
Raise forecasts and PO
Q1 CY11 profit at Rs 733mn was significantly ahead of expectations. While net
sales were largely in line at Rs 13.9bn (up 34%), EBITDA grew 35% at Rs 1.6bn,
25% ahead of estimates. We have upgraded our EPS forecasts by 17%-22% over
CY11-12E to reflect this unexpected beat, even while factoring moderation in
demand trends. Raise PO by 15% to Rs 1,725.
We expect double-digit margins to be sustained
EBITDA margins rose 290bps yoy to 11.7%, compared to our est of 9.1%, (1) better
mix, in favour of Eicher models instead of Volvo trucks, (2) improved profitability of
two wheelers, reflected in standalone margins at 13.1% (up 480bps qoq), and
(3) benefit of cost cutting initiatives. This has been the second successive quarter of
significant surprise, highlighting the underestimation of benefits of business which is
scaling up. We therefore raise assumptions by ~250bps/year
Demand outlook strong across segments
Despite macro-headwinds, we largely maintain segmental assumptions over
CY11-13E. In Commercial Vehicles, we forecast 13% sales CAGR, thanks to
strong franchise in light vehicles (10% CAGR), and more significantly, new
launches in higher tonnage trucks. In two wheelers, freeing of capacity should
drive 20% sales CAGR.
Preferred mid cap pick
Eicher Motors distinguishes itself from peers, thanks to identifiable growth drivers
such as (1) domestic trucks, where it is gaining acceptance from operators, and is
therefore likely to gain share, (2) two wheelers, due to niche positioning in
premium bikes, (3) export of engines to meet Volvo's global requirements. Also,
cash surplus is equivalent to Rs 401/share or 35% of market capitalization.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Eicher Motors
Q1 surprise purely operational
Raise forecasts and PO
Q1 CY11 profit at Rs 733mn was significantly ahead of expectations. While net
sales were largely in line at Rs 13.9bn (up 34%), EBITDA grew 35% at Rs 1.6bn,
25% ahead of estimates. We have upgraded our EPS forecasts by 17%-22% over
CY11-12E to reflect this unexpected beat, even while factoring moderation in
demand trends. Raise PO by 15% to Rs 1,725.
We expect double-digit margins to be sustained
EBITDA margins rose 290bps yoy to 11.7%, compared to our est of 9.1%, (1) better
mix, in favour of Eicher models instead of Volvo trucks, (2) improved profitability of
two wheelers, reflected in standalone margins at 13.1% (up 480bps qoq), and
(3) benefit of cost cutting initiatives. This has been the second successive quarter of
significant surprise, highlighting the underestimation of benefits of business which is
scaling up. We therefore raise assumptions by ~250bps/year
Demand outlook strong across segments
Despite macro-headwinds, we largely maintain segmental assumptions over
CY11-13E. In Commercial Vehicles, we forecast 13% sales CAGR, thanks to
strong franchise in light vehicles (10% CAGR), and more significantly, new
launches in higher tonnage trucks. In two wheelers, freeing of capacity should
drive 20% sales CAGR.
Preferred mid cap pick
Eicher Motors distinguishes itself from peers, thanks to identifiable growth drivers
such as (1) domestic trucks, where it is gaining acceptance from operators, and is
therefore likely to gain share, (2) two wheelers, due to niche positioning in
premium bikes, (3) export of engines to meet Volvo's global requirements. Also,
cash surplus is equivalent to Rs 401/share or 35% of market capitalization.
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